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Investors would do well to eat their Wheaties. After drifting downward from their four-year high of $9.43 a bushel in July, U.S. wheat futures are poised to bounce back.

Just a few months ago, analysts and traders thought the world's wheat supplies remained ample enough to easily meet demand, despite a range of threats to crops. But those threats have grown, and the outlook for wheat supplies is tightening. Add in a likely uptick in demand for U.S. wheat exports, and futures should rise in the coming weeks.

Top exporters of wheat, including the U.S., Russia, and Australia, have seen their crops damaged by drought or are now facing a drought. As a result, the Agriculture Department has repeatedly cut its forecast for world wheat output for the current crop year six times since its initial forecast in May. Its November estimate, 651.4 million metric tons, is 3.9% below what it projected in May.

In the U.S., the winter-wheat crop now in the ground is in the worst shape for this point in the season since the USDA began releasing crop ratings in 1986. Just 34% of the crop was rated in "good" or "excellent" condition in a USDA report on Monday, compared with 50% a year earlier, due to drought in the Great Plains. "Unless there is a significant improvement in this year's winter-wheat crop conditions, we fear a repeat of the 'summer drought shock,' this time in winter, for wheat prices," Credit Suisse analysts said in a Nov. 15 research note.

Dry weather has also reduced the outlook for Australia's wheat crop. The USDA this month cut its forecast for Australia's wheat harvest by 8.7% to 21 million metric tons. In the Black Sea region, major producers, including Russia and Ukraine, saw drought-reduced harvests translate into fewer exports. In Argentina, meanwhile, excessive rain has raised concerns about crop disease reducing the quality of the country's crop.

WHEAT PRICES COULD ALSO benefit in coming weeks from concerns about tight corn supplies, since both grains are used in animal feed. Many analysts expect the USDA's final corn-production estimates in January to reflect that U.S. farmers harvested fewer acres of corn this year than previously expected, since many farmers abandoned fields that sustained heavy drought damage. Goldman Sachs analyst Damien Courvalin estimates harvested corn acreage totaled 87.3 million acres, 0.5% less than last projected by the USDA.

Front-month wheat futures (the nearest-term contract, which usually has the highest trading volume) at the Chicago Board of Trade are likely to trade at $9.50 a bushel in February due to a range of threats to world production, Courvalin added in a Nov. 9 research note. Dwindling supplies elsewhere could also boost demand for U.S. wheat, he wrote. Wheat futures for December delivery finished the week up 9.75 cents, or 1.2%, at $8.48 a bushel on the Chicago Board of Trade. "We believe that a window will open soon for U.S. wheat exports," Courvalin said. "Its magnitude will be key to wheat prices."

U.S. wheat exports have already started to pick up. The USDA on Friday reported net wheat-export sales of 657,400 metric tons in the week through Nov. 15, well above the range of 200,000 to 450,000 tons predicted by analysts.

Christian Mayer, a market adviser at Northstar Commodity in Minneapolis, likes what that augurs: "That was a solid sign," he says.